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By Georges Panayotis

Volkswagen's recent environmental fraud scandal raises questions regarding the proportions to which each bad industrial decision can grow and regarding the immense consequences that can bring a company, a sector, or even an entire country down onto its knees.

 

We've already been through Enron, sub-primes, and NSA wire-tapping, so the time has come to stop being naive... manipulations, fraud and attempts at fraud to circumvent bothersome regulations have always existed. But while once upon a time the methods were developed through clever craftsmanship, today the globalization of economies, markets and commercial challenges have changed the game. Embezzlement, regardless of motivations, is part of a nearly planet-wide strategy implemented by sophisticated teams that have pushed lies and disinformation to their highest levels. The possibilities offered by new technology are both enormous and fearsome. Connectivity is such that today it is possible to remotely take control over a computer, a website, a car or even a corporation. "Hackers" are the new Kings of the Net and the precious agents of any destabilization effort.

Intoxicated by their power, driven by increasingly fierce competition, industrial and traditional service groups are using every means to get some technical edge, to gain a few more market shares, and may even be willing to overturn the national rules and and squash those who respect them in passing. The commercial war becomes incontrollable and governments as powerful as the United States are needed to block "barbarian invasions" from Europe and Asia. But it is also because the United States has never hesitated to activate both the most severe protectionism on the domestic market and the most unleashed liberalism elsewhere to open the way for its companies. The financialization of all economic activities offers a new, dangerous dimension involving risk taking that is beyond anyone's comprehension.

It is undoubtedly not a coincidence that Volkswagen has been caught red-handed just as America's automobile industry is struggling out of a severe crisis and ambitious projects are livening things up at Google and Apple in terms of clean cars. The global economy is watching a giant game of liar's poker, in which a few billion must be laid out in order to sit down at the table. If the bluff is called, the bet is lost and the player may leave, definitively washed out. The real-world economy, that of medium and small companies that don't have the means or culture of cheating must sit back and watch, and fret over the consequences of this battle. The governments and their inspection bodies are quickly overwhelmed by groups that are able to create cartels and know how to play along national frontiers.

In all sectors, including the hotel industry, the same challenges arise to ensure the rules of the game are not manipulated. Despite the disclosure of the bad practices of the "Band of 4" American auditing firms by the courts of Brussels and by national governments, not much has happened. Sometimes masquerading behind a false "Chinese Wall", Cf Deloitte and InExtenso among others, these firms are not content with accounting: they direct strategies, get involved in evaluations and advise transactions without much concern for conflicts of interest. The steady rise in average daily rates that determine the profitability of operations is not totally unrelated to their traditional recommendations. It should come as no surprise that price competitiveness is now part of the equation that makes alternative accommodations such a challenge for hoteliers. In contrast, don't worry too much about the Big Four: inbreeding between colleagues and competitors is never sanctioned and their clients are the ones who bear the actual risks, including legal challenges or even penalties from the competition's authorities.

The example made of Volkswagen should make everyone step back and think. Its future is far from looking bright and by domino effect one might question the global reputation of Germany's automobile industry and the pertinence of "Deutsche Qualität". The hotel industry has also been weakened by Revenue Management strategies based on objectives of interested parties to deliver steady price growth, a policy that boosted the valorization of assets. Today, it is experiencing blows from alternative accommodations and the consequences of a lack of renewed supply.

It is important to consider the importance of governance, so that decision making is truly in the hands of market players. The market's efficiency relies on intelligent regulation by the relevant authorities that must be able to guarantee the transparency and reliability of information, and get everyone in the game to respect the same rules.

About Georges Panayotis

Georges Panayotis is President of MKG Consulting. Born in a family of hoteliers for three generations, Georges Panayotis, 51, left Greece at the age of 18 to pursue his studies in Political Sciences and to obtain his Master in Management at the French University of Paris Dauphine. He then joined the Novotel chain, which will become the Accor Group, to manage the International Marketing Division. After developing specific marketing tools for the hotel industry, he left the group in 1986 to start his own company, MKG Conseil, now MKG Group. In twenty years, the group has become the European leader in studies and consulting for the Hospitality industry. The company employs over 70 people in four departments: marketing studies, database, quality control and trade press, with two publications HTR Magazine and Hotel Restaurant Weekly. The company helped the development of over 2,000 hotels in France and in Europe, with offices in Paris, Cyprus and London. Georges Panyotis is the founder of the Worldwide Hospitality Awards and the Hotel Makers Forum, and the author of several publications on Marketing and Operations in the hotel business, He is a regular consultant for several television channels, among which Bloomberg Television, and radio networks.

Contact: Georges Panayotis

g.panayotis@mkg-group.com

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